By John Thedford, CEO, Family Financial Inc., Winter Park, Fla.
When I first launched a chain of pawn shops called La Familia Pawn in 2009, the local communities and banks we approached mistrusted us because of the industry had such a negative image. On top of that, we faced stiff competition: Three established, publicly owned companies collectively owned thousands of pawns shops across the nation. Here's how I've managed to not only move past our industry's bad reputation, but also outpace the competition.
Overcoming the image problem
Pawn shops have a bad reputation for predatory lending and dealing in stolen goods. A lot of people assume that pawn shops lend money to individuals whom they know can't pay back the loan, so that they'll be forced to forfeit the personal items that they've pawned as collateral.
I had previously owned a company that operated 70 pawn shops across the Southeastern United States, and I found that the industry's bad image made it difficult to secure bank loans or lease properties. The truth is, the bad reputation is unfair: 80% of loans made by pawn shops are paid back, and less than 0.1% of all pawn shop transactions deal in stolen property. So when I launched Family Financial, I wanted to turn the negative stereotype on its head.
Looking the part
People tend to think of pawn shops as dirty hole-in-the-wall places with sketchy employees. In response, we do everything we can to keep our stores and employees looking as presentable as possible. An employee does a parking lot sweep and picks up trash outside the store every hour. We restripe our parking lot lines once a month and repaint the outside of our building once a year. Chipping paint and dirty parking lots bring to mind all the other nasty things people associate with pawn shops, and we want to rise above the stereotype.
We also have a dress code. Male employees must wear long sleeve shirts and ties. Female employees have more choices, but the key word for everyone is "professionalism." When we interview candidates, we look for people who are not only hardworking team players, but also clean-cut and professionally dressed. In order to help ensure that our employees meet these requirements, we pay significantly above minimum wage. We've found the more you pay your employees, the more you can expect from them.
These are simple and cost-efficient steps but they've helped us earn the trust of the working and middle-class families that we serve.
Engaging with the community
The most effective way to win over suspicious communities is to get involved in them. Right now the CFO and I are volunteering to teach an eight-week session on how to be an entrepreneur at local middle schools. Every employee at my company -- myself included -- volunteers some weekends to read out loud to middle school students. We don't force our employees to do it, but we do hire people who demonstrate a genuine desire to give back to the community. Sometimes customers will come into our store and say "Oh! You were reading to my kid last week in class."
In the past, we have teamed up with the Orlando Business Journal to sponsor underprivileged youth in a program that pays for part of their college tuition. Next year we plan on donating $75,000 to the cause. These practices are good for the community, but they're good for the business, too: Every time we win over a community it makes it easier to go to a bank and get a loan or convince the next community to allow us to lease the property for another store.
A new perception
Our measures have helped change people's mind about the industry -- or at least about our company. We no longer have trouble getting bank loans, and we now have 18 stores in Florida and Puerto Rico and project $25 million in annual revenue for 2011. I believe our strategy has been so effective because we aren't pretending to be something we're not: We're simply taking steps to show people what kind of business we actually are.
John Thedford is the author of Smart Moves Management: Cultivating World Class People and Profits, Emerald Book Co., 2010.
--As told to Harper Willis